Maine Aims to Disallow Out-of-town Cannabis Business Owners

The state of Maine is determined to preserve its requirement that cannabis businesses be owned by its own residents, bringing the dispute into uncharted legal territory.

First, some background. Officials in the Pine Tree State “originally required all medical and recreational cannabis businesses to be owned by residents,” as the Portland Press Herald explained in an article. 

But that requirement was challenged last year by Wellness Connection of Maine, the state’s largest chain of medical cannabis dispensaries that had sought a license for a recreational cannabis dispensary in Portland, the capital city of Maine.

Wellness Connection, which is owned by a Delaware-based LLC, filed a lawsuit against the city of Portland after council members there approved an ordinance capping the number of licenses for adult pot use dispensaries and establishing a system that gave preferential treatment to local applications.

Matt Warner, an attorney for Wellness Connection, argued that the requirement was unconstitutional, saying that as “a matter of constitutional law, states and cities can’t discriminate against citizens of other states based purely on residency.”

“More than 25 percent of the points awarded through Portland’s competitive licensing process are based on residency, so we’re automatically disqualified for those points, based purely on our owner being from Delaware,” Warner said at the time.

The company argued in its filing that limiting “the opportunities for (Wellness Connection) to create a brand, build a reputation and establish customer loyalty in Portland at the adult-use market’s inception would harm them in ways that cannot be reduced to a monetary damages award.”

The state stood down, eventually doing away with the requirement for recreational cannabis businesses, and in August, a federal court sided with Wellness Connection in a ruling that overturned the in-state residency requirement for medical marijuana dispensaries. 

That decision, from U.S. District Court Judge Nancy Torresen, has set the stage for the latest round in the dispute between the state and Wellness Connection, with Maine seeking to uphold its requirement that medical dispensaries be owned by residents.

The Press Herald reported that it “appears the case is the first of its kind to reach a federal appeals court, where the opinion could have ramifications in other states,” with the central question hovering over “whether the residency rule violates the U.S. Constitution by restricting interstate commerce.”

In her ruling back in August, Torresen said that the “notion that the medical marijuana industry in Maine is wholly intrastate does not square with reality.”

“I recognize that none of the courts that have confronted this specific constitutional issue have rendered final judgments, and it also seems that no circuit court has addressed it,” the judge wrote, as quoted by the Press Herald.

“But given the Supreme Court’s and First Circuit’s unmistakable antagonism towards state laws that explicitly discriminate against nonresident economic actors, I conclude that the Dispensary Residency Requirement violates the dormant Commerce Clause.”

The appeal has been filed by both the state of Maine and a nonprofit industry group called the Maine Cannabis Coalition, which is in favor of the residency requirement.

In briefs filed in the 1st U.S. Circuit Court of Appeals, the state says that “the dormant Commerce Clause does not apply to Maine’s intrastate market for medical marijuana.”

“Nor do the residency requirements in the Maine Medical Use of Marijuana Act burden interstate commerce more severely than Congress, because Congress has already eliminated that market,” the brief said, as quoted by the Press Herald. “Because striking down Maine’s residency requirements at issue in this case would do nothing to expand legal interstate commerce in the United States, they should stand.”